Discussion
For that same firm the contribution margin ratio is
Answer: D
Correct answer: 0.40
The contribution margin ratio is the contribution as a fraction of the price:
\[ \frac{50 - 30}{50} = \frac{20}{50} = 0.40 \]Forty paise of every rupee of sales is left after the variable costs of that sale, to cover fixed costs and then to become profit. The complement, 0.60, is the variable cost ratio.
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